I just tried MGI out a couple of days ago and experienced the same problem. Yup, it will not display in 16 shades of grey on any OS 3.1 device. The reason it has this problem is because OS 3.1 does not support this mode. HOWEVER, many programmers can hack around the OS and support 16 shades of grey because it is supported by the hardware (Album-To-Go v1.6.2, FireViewer). HOWEVER, they can not display any menu items or buttons while in the hacked display mode. That is why MGI can not access the 16 shades of grey mode; they display buttons and the menu bar on the screen. Notice how FireViewer gives you a full screen image and the menu only pops up after the image is off of the screen (I believe they hard coded the buttons display to overlay directly on the image though).

In any event, FireViewer is the best we can do on our poor little VDx units... If only there were a colour Edge...